Google IPO a sign of better offerings

Many investors are eagerly waiting for Google, the web-search titan, to go public. But those same investors, many still smarting from losses when technology stocks plummeted, may not be ready to jump at just any new technology offering in 2004.

The market for initial public offerings in the US has languished of late, with fewer than 100 in each of the past three years. But in 2004, analysts expect as many as 150 companies to go public - roughly half of them technology related.

But do not expect a replay of 2000, when there were nearly 400 initial offerings, most of them by technology companies. This time, investors were likely to expect profitability to be on a stock issuer's resume, said Richard Peterson, chief market strategist with Thomson First Call.

Clearly, that is the allure of Google, the closely held web search company founded by two Stanford computer-science graduate students in 1998. In recent weeks, Google has become the subject of speculation that it intends to go public in the northern spring.

Although Google discloses little about its finances, people close to the company say it reached profitability long ago and has been on a growth path ever since.

Over recent months, the company approached investment banks about underwriting for the offering, and is considering selling a 10-15 per cent stake to the public in the hope of raising more than $US2 billion ($A2.7 billion), according to executives close to the talks.

"It will be exciting on a scale of Netscape," said David Menlow, president of IPOfinancial.com, a research company in New Jersey. "The difference is that Netscape wasn't profitable."

Given the losses many investors suffered when tech stocks plunged, analysts predict Google's offering is not likely to spur the sort of stock-offering stampede that Netscape did.

"It will not be the Pied Piper," Mr Menlow said. "It's not going to sound the all-clear for companies to go public irrespective of their financial health."

Investors are likely to expect profitability to be on a stock issuer's resume.

But a successful Google offering may help raise investor confidence in new issues by other profitable tech companies. Or so those companies hope.

Staktek Holdings, a computer-memory company, aims to raise $US145 million through an IPO this year. The Texas company reported revenue of $US47 million last year and a $US11.5 million profit.

But not all tech companies set to go public in early 2004 have made a profit.

Few analysts expect the public to become giddy about the new tech offerings. "There are signs of a recovery, but we're not going anywhere near where we were in the late 1990s," Mr Peterson said.